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SUPREME COURT OF INDIA
H.L. DATTU AND DIPAK MISRA, JJ.
STATE OF UTTAR PRADESH & ORS. - Appellants
VERSUS
SYSTEMATIC CONSCOM LIMITED - Respondent
Civil Appeal No.1843-1945 of 2013
Decided on : 26-2-2013.
Constitution of India,1950 - Article 226 - Uttar Pradesh Trade Tax Act, 1948 - Section 7-D - Central Sales Tax Act, 1956 - Sections 14 and 15- Rule 4 ,U.P. Trade Tax Rules, 1948 - composition money payable - Commissioner of Trade Tax - Civil Appeals we are required to consider the exactness or otherwise of the circular issued by the Commissioner of Trade Tax, Uttar Pradesh dated 04.06.2007. By the impugned Circular, the Commissioner taking resort to the proviso appended to Section 7-D of the Uttar Pradesh Trade Tax Act, 1948 (for brevity the Act) has directed the assessing authorities to recover State development tax from the dealers under Section 3-H of the Act in addition to the composition money payable under the scheme of composition introduced by the government of Uttar Pradesh - Aggrieved by the circular so issued by the commissioner, the respondents herein had filed writ petitions before the Allahabad High Court inter alia calling in question the correctness or otherwise of the said circular. The Division Bench of the High Court by the impugned judgment and order has allowed the Writ Petitions filed by the assessees and annulled the circular instructions issued by the Commissioner of Trade Tax dated 04.06.2007 and also set aside the orders of assessment passed by the assessing authority pursuant to the circular instructions so issued –Held, State Government by which the Government under the charging provision has the power to levy tax on the taxable turnover of the dealer at the rate prescribed under the provisions of the Act. The said rate of tax as prescribed by the legislature under the charging section can be altered when the legislature empowers the government to change the rate of tax by issuing notification. In the instant case, the Commissioner has issued the impugned circular on the ground that by the introduction of State Development Tax by Act 9 of 2005, the State Government has effected the change provides for composition of amount at an agreed rate on the turnover of the dealer, in lieu of taxes payable by the dealer under the Act. Firstly, offer would be made by the assessee and the same requires to be accepted by the assessing authority and then only there would be a concluded contract between the dealer and the assessing authority for payment of tax. The proviso, as we have already noticed, comes into play only when there is a change in the rate of tax. It provides, that, when there is any change in the rate of tax on the goods, such increase will proportionately affect the rate of compounding of tax. For the purpose of understanding the meaning of ‘change in rate of tax’ employed under the proviso to Section 7-D of the Act, the dictionary meaning of ‘change’ and the ‘rate’ is required to be set out. The ordinary meaning of change is to become different, to transform or convert and rate is the standard or measure. On a combined reading of both the meanings, the change in the rate of tax would mean any such change in the already existing standard or measure of computing the tax payable but not the introduction of a yet another kind of tax for levy and collection of the tax from the dealers. State Development Tax as introduced by the State Government under Section 3-H of the Act provides for imposition of one percent of State Development Tax separately on the taxable turnover thereby creating an independent charge. Commissioner dated 04.06.2007 and, therefore, the same requires to be set aside. Accordingly, we confirm the judgment and order passed by the High Court for the reasons stated by us -Now, we leave it open to the assessing authorities, whether to demand the State Development Tax from those dealers who had already opted for the composition charges under the composition scheme by way of issuing appropriate demand notices in accordance with law. If and when such demand notices are issued by the assessing authority/ authorities, the assessees are at liberty to question the same before the appropriate forum - Ordered accordingly
ORDER
1. Applications for exemption from filing Official Translation are allowed.
2. Delay in filing and re-filing the Special Leave Petitions is condoned.
3. Leave granted in all the Special Leave Petitions.
4. In this batch of Civil Appeals we are required to consider the exactness or otherwise of the circular issued by the Commissioner of Trade Tax, Uttar Pradesh dated 04.06.2007. By the impugned Circular, the Commissioner taking resort to the proviso appended to Section 7-D of the Uttar Pradesh Trade Tax Act, 1948 (for brevity 'the Act') has directed the assessing authorities to recover State development tax from the dealers under Section 3-H of the Act in addition to the composition money payable under the scheme of composition introduced by the government of Uttar Pradesh prior to 01.05.2005.
5. Aggrieved by the circular so issued by the commissioner, the respondents herein had filed writ petitions before the Allahabad High Court inter alia calling in question the correctness or otherwise of the said circular. The Division Bench of the High Court by the impugned judgment and order has allowed the Writ Petitions filed by the assessees and annulled the circular instructions issued by the Commissioner of Trade Tax dated 04.06.2007 and also set aside the orders of assessment passed by the assessing authority pursuant to the circular instructions so issued.
6. The facts in nutshell are: The respondents are civil and electrical contractors engaged in executing the civil works for repairing, construction of buildings, etc. The materials used by the dealers in execution of the said civil works is either purchased within the state or from outside the state attracting liability for payment of tax under the provisions of the Act as envisaged under Section 3-F of the Act. Section 3 of the Act provides for levy and incidence of tax by which the tax is levied on every transaction in the nature of sales and purchases of goods at the ‘rates of tax’ stipulated in respect of different goods in Section 3-A of the Act.
7. The Government of Uttar Pradesh had announced a scheme, known as “Composition Scheme”, under the provisions of Section 7-D of the Act under which the state government is empowered to accept a lump sum amount in-lieu of tax that may be payable by the dealer in respect of such goods or class of goods and for such period as may be agreed upon. For that purpose, the dealer is obliged to execute an agreement of undertaking to pay the sales tax in lump sum and the same was assessed at an agreed rate as envisaged under the Act itself. The scheme as introduced by the legislature provides for a bilateral agreement between the assessee and the Sales Tax Authorities with an object to dispense with the requirement of regular assessment and for the easy purposes of levy and collection of the tax payable under the Act. A dealer who has opted for payment of lump sum amount in lieu of tax, is not required to file monthly, quarterly or annual returns of his turnover. It is the choice of a dealer to opt for compounded payment of tax and if the said choice is in accordance with the scheme and is ultimately accepted by the authority concerned, it becomes an agreed amount of tax. The department and the dealer are thereafter bound by the said agreement.
8. The Sate Government by Act No. 9 of 2005 dated 24.03.2005 with effect from May 1, 2005 has introduced the State Development Tax under Section 3-H of the Act at the rate not exceeding one percent of the taxable turnover as the State Government may by notification specify on the dealers whose aggregate turnover exceeds fifty lakh rupees. In pursuance of such notification, the Commissioner of Trade Tax keeping in view the proviso so appended to Section 7-D of the Act, has issued Circular instruction to all the assessing authorities in exercise of his powers under Rule 4 of the U.P. Trade Tax Rules, 1948 ('the Rules' for short) to levy one percent of state development tax on civil and electrical
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